ENERGY: No Contacts With Russia On Peace Talks: Zelenskiy

GILT PAOF RESULTS: GBP749.998mln of the 4.375% Jan-40 Gilt sold

• GBP750.0mln was on offer.
• This leaves GBP31.113bln of the gilt in issue.

• MBA composite mortgage applications inched up 0.8% (sa) last week, essentially flat after -10% and +9.4% in the previous two weeks.
• New purchase applications outperformed after some rare trend underperformance since June, rising 3.4% after -11.8% compared to -2.6% after -7.4% for refis.
• Relative levels: composite at 54% of 2019 levels vs 64% for new purchases and 43% for refis.
• The 30Y conforming mortgage rate increased 2bp last week to 6.84% after a 5bp increase the week prior. The 6.77% in the first week of July was the lowest since early April.
• With mortgage rates fading a 7bp rise in average 10Y swap rates over the week, the spread narrowed a little further to 295bps for its tightest since mid-June although it has roughly kept to a 295-305bp range since the April reciprocal tariff announcements barring a brief peak of 315bps. It averaged 285bp in Q1.
• Within mortgage rate details, jumbo rates again traded inside at 6.75%. The regular-jumbo spread of 9bps is similar to the previous two weeks having last been higher in Oct 2023 in a sign of relative loosening in specific lending conditions in recent months.   

SOFR options seeing heavy low delta put volumes ahead the NY open, otherwise, more consistent call trade on lighter volumes in SOFR & Treasury options reported. Underlying futures weaker but off overnight lows. Projected rate cut pricing  cools slightly vs. late Tuesday (*) levels: Jul'25 at -1.2bp, Sep'25 at -15.7bp (-16.1bp), Oct'25 at -28.7bp (-28.9bp), Dec'25 at -45.6bp (-46.2bp).

• SOFR Options:
  • Block/screen, +103,000 SFRQ5 95.62 put, cab
  • Block/screen, +8,284 0QQ5 97.00/97.25 call spds, 3.0
  • 2,000 0QZ5 98.00 calls ref 96.865
  • 2,000 SFRX5 96.31/96.50 call spds ref 96.11
  • 7,200 SFRU5 95.62/95.68 2x1 put spds, 0.5 ref 95.835
  • 10,000 0QQ 96.87 calls ref 96.785
  • 3,000 SFRU5 96.00/96.37 call spds, 1.75 vs. 95.845/0.05%
  • +2,000 SFRU5 96.00/96.25 call spds, 1.5 vs. 95.845/0.05%
• Treasury Options:
  • +2,000 TYQ5 111 straddles, 26
  • +2,000 TYQ5 111/111.5 1x2 call spds, 10
  • -1,500 TYU5 111/112.5 call spds, 34 vs. 111-05.5/0.32%
  • -1,500 wk5 TY 111 puts, 20 vs. 111-02.5/0.43%
  • -1,500 TYU5 109 puts, 7